Analyzing Financial Reports for Strategic Planning

The report presents an in-depth evaluation of a company's fiscal situation through its 2018 budgetary outcomes. Highlighted are the challenges leading to a projected negative net profit by year-end, with suggestions for strategic production process enhancements to lower costs and bolster competitiveness. Cash management improvements are emphasized due to inadequate current cash reserves, despite recent enhancements. The analysis extends to external market factors impacting performance, particularly referencing Australia's economic conditions post-global financial crisis and subsequent government policy shifts affecting tourism—a sector crucial to the company's product lines. Despite past challenges, there is an optimistic forecast for increased sales stemming from a recovering global economy and positive industry trends.

Running Head: Management Accounting
1
Project Report: Management Accounting

Running Head: Management Accounting
2
Contents
Introduction.......................................................................................................................3
Overview of expected result.............................................................................................3
Contribution margin for every product.............................................................................3
Recommendation regarding manufacturing and selling...................................................4
Recommendation regarding cash position........................................................................5
Analysis over current market situation.............................................................................5
Future prediction...............................................................................................................6
Conclusion........................................................................................................................6

Running Head: Management Accounting
3
Introduction:
It is required for every manufacturing company to analyze the market before entering
into the market or diversifying the products or the market. Budgeting is a technical tool which
is used by the companies to predict the future according to historical data, current trend and
future prediction. These budgeting reports are prepared to analyze the revenue and cost in
future. So that the strategy could be made accordingly and better step could be taken by the
company on time. In this paper, budgeting report of 2018 has been analyzed and
consequently, the 2019’s future prediction has also been done to analyze the market place for
the company. Various trends of industry have been analyzed for this paper. According to the
2018’s budget report, it has been found that the company is facing various issues and the net
profit of the company would be negative at the end of the year.
Overview of expected result:
2018’s budget report of the company has been calculated after considering various
trends and data related to the industry and the company. Through the reports of budgeting, it
has been found that the net profit of the company is quite negative. Sales revenue of the
company is quite lower than the total expenses of the company. It has been analyzed that
various cost of the company could be reduced to maintain the performance of the company,
sales budget of the company depict about the revenue of the company which is average.
Further, the cash collection budget depict about the collection of cash which is running in a
better manner. In addition, units are produced according to the trends so that the cost of the
company could be reduced. More, direct material and direct labour cost of the company could
be cut by the company. Manufacturing overhead budget depicts about entire fixed and
variable expenses of the company which are quite high. Lastly, the operating cost budget,
inventory budget, cost of sales budget, monthly cash budget etc depict about the average
performance of the company which could be enhanced by the company by making some
changes into its operations.
Contribution margin for every product:
Contribution margin is the margin between the product’s price and the variable costs
of the product. It depict about the per unit profit which could be earned by the company by
selling one more unit of the product (FIRER et al, 2012). The more the contribution margin
of a company would be the more the profit of the company as at that level it would be easy

Running Head: Management Accounting
4
for the company to achieve the break eve point quickly. The graph f contribution is as
follows:
Contribution margin of the company has been analyzed and it has been investigated
that the contribution of each product of the company is as follows:
Contribution margin per unit
Bikini
Board
short Towel Beach Bag
Sales price
$
100.00
$
75.00
$
45.00
$
65.00
Less: variable cost
$
32.25
$
34.25
$
31.50
$
26.50
Contribution
margin
$
67.75
$
40.75
$
13.50
$
38.50
It depict that the contribution margin of Bikini is more than any other product whereas
the contribution margin per unit of Towel is lower.
Recommendation regarding manufacturing and selling:
Through this report, it has been analyzed that the manufacturing and selling of the
company is quite competitive. Through this report, it has been investigated that the
performance of the company is quite competitive. Through this report, it has been found that
if the manufacturing would be done in the company itself than it would be more [profitable
for the company rather than outsourcing the product and sell them by the name of the
company.

Running Head: Management Accounting
5
It is also recommended to the company to make some changes into production
process to reduce the level of cost and make the competitive advantage of a company in
concern of production. Through this report, it has been identified that, this company is require
to introduce some marketing policies to enhance the sales of the product so that the company
could be more profitable as the fixed cost of the company is quite high than the variable cost
of the company.
Recommendation regarding cash position:
Cash position of the company depict about the position of the cash in hand and bank
balance of the company which could be used by the company at any time to meet sudden risk
and opportunity of the company. According to the budget analysis of the company, it has
been found that the company is required to make some changes into the performance and
procedure of the company. Currently the cash position of the company is as follows:
Budgeted ending
cash inventory
-
36,
458
-
53,
848
21,
84
0
77,
95
5
1,51
,968
1,80
,532
1,87
,267
2,05
,852
1,63
,731
1,56
,627
2,17
,498
2,52
,453
Through this reports, it has been found that the cash position of the company has been
enhanced from last few months but still company is required to manage over the cash as the
current cash is not that much compatible and company is suggested to manage a fixed amount
of cash in hand.
Analysis over current market situation:
Thus through this report, it has been found that the position of the company is not
strong and there are various factors which have affected the operations of the company.
Through this report, it has been found that mainly the external factors of the market have
impacted over the performance and position of the company. Market condition of Australia
has been analyzed and through the reports, articles and studies, it has been found that the
global financial crisis of UK have impacted in a bad manner to the Australian market which
depict about the bad market and stock condition of the company. Due to the financial crisis,
the tourist of the country has been reduced and it directly impacted over the products of the
company as few people are going over the beach and in swimming pool and thus more sales
could not b possible by the company.

Running Head: Management Accounting
6
Further, it has been found that various past data and change into the policy of the
company has also been analyzed and it has been estimate that due to few new polices of the
Australian government, various changes into the tourism level f the company has been taken
place and the changes were in a positive manner. Further, the current situation of the industry
and market is enhancing and it has been found that in future, the company would be able to
enhance its sales on a huge level.
Future prediction:
For this report, future prediction has been analyzed further to identify the future
changes in the industry and the company. for analyzing a study over the Australian market
and cloth industry and tourism industry, it has been analyzed that the performance of the
company has been enhanced with a great level and currently few new polices has been
launched by the Australian government which impacted over the tourism industry of the
country. And due to that, company would also be able to enjoy the better market in the future.
Further, the current situation of the industry and market is enhancing and it has been found
that in future, the company would be able to enhance its sales on a huge level.
It has also been analyzed that the issues of global crisis has been lowered now and it
would not at all impact over the market and the company in near future and thus the company
would be able to enhance the market more.
Conclusion:
Through this report, it has been analyzed that according to the 2018’s budget report, it
has been found that the company is facing various issues and the net profit of the company
would be negative at the end of the year. It is also recommended to the company to make
some changes into production process to reduce the level of cost and make the competitive
advantage of a company in concern of production. Further, it has also been analyzed that the
cash position of the company has been enhanced from last few months but still company is
required to manage over the cash as the current cash is not that much compatible and
company is suggested to manage a fixed amount of cash in hand.